Blair accuses Tories of 'Basil Fawlty' economics

Tony Blair today savaged the Conservatives' economic plans, describing them as "alchemy" in a sustained attack on the party's financial strategy.

In a speech to an audience of business leaders at Canary Wharf, in London, Mr Blair described the Tories' tax and spending plans as "Basil Fawlty" economics.

Labour - seeking to move voter attention away from Mr Blair and the issue of trust - has made its handling of the economy a central plank of its election campaign and manifesto, which was launched yesterday.

The prime minister today focused again on what Labour believes is its trump card - the economic stability of the past eight years, which has earned plaudits from organisations such as the International Monetary Fund.

He told his audience that, on May 5, voters would be able to choose between two very different economic programmes. "Our attack on the Conservative programme is not simply part of the tit for tat of an election. It exposes a fundamentally flawed prospectus for Britain's future," Mr Blair said.

"It is a programme that is more alchemy than economics. It promises to cut tax, spend more, borrow less - all at once. Because of the inherent implausibility of such a programme, it then promises to square it all by a 'savings' programme of £35bn," he added.

Seeking to portray Labour as the party of economic responsibility, Mr Blair said: "It is a very odd thing for someone like me - brought up with the idea that the Conservatives were always heard first on the economy, with us trying to catch up - to see them now in the position of Basil Fawlty and the war."

Mr Blair trumpeted the government's economic achievements of the past eight years - high employment, sustained growth, low interest rates and low inflation. However, he warned that Britain could not afford to rest on its laurels in the face of competition from rising powers such as India and China.

The prime minister said that was why the government was investing in an "unprecedented way in education and science - after decades of neglect - while at the same time establishing the Competition Commission and reducing corporation tax".

Mr Blair pledged a £250m, three-year programme to renovate or build at least one new science laboratory in every secondary school in England, designed to boost school science.

But as he showcased the achievements of the UK economy, the British Chambers of Commerce (BCC) became the latest group to predict more difficult times ahead. It said its survey of more than 5,000 firms showed the economy was clearly slowing, with the business environment becoming "riskier and more difficult".

The BCC added that the results of the research, which covered the first three months of the year, were "disappointing and worrying". The performance of manufacturing firms was "negative", with home sales and orders falling, confidence declining and cashflow worsening, it added.

David Frost, the BCC director general, said the survey showed that the Bank of England should not consider interest rate increases until August at the earliest.

"The clamour for early interest rate increases is unjustified and potentially dangerous, particularly for manufacturing," he said. "Higher interest rates would depress the already very weak growth in consumer spending and may damage the housing market."

The BCC confirmed its recent economic forecast that growth would slow from over 3.1% last year to 2.5% this year and 2.3% in 2006.

The IMF yesterday also predicted slower growth for the UK economy. While praising the British economy's performance as "robust", it said the economy would grow by only 2.6% this year, slower than the 3.1% of 2004 and well below the Treasury's forecast of 3-3.5%.

The IMF also warned the government to rein in spending growth or risk having to raise taxes to get public finances back on a sustainable footing.

· Meanwhile, Labour launched its Welsh manifesto today with a pledge to give the Welsh assembly more powers, and received the backing of the national team's rugby coach, Mike Ruddock.

Labour's manifesto promises to act on last year's Richards review into the devolved assemblies' legislative powers, but gives no exact details. A white paper has been promised early in a third-term Labour government. Pledges to cut NHS waiting times to six months by 2009 - compared with 18 weeks by 2008 in England - are also in the manifesto, although this is a responsibility of the assembly.

There is also a promise of a £200 rebate for council tax payers over 65, and a pledge that no child will leave school without qualifications by 2010.

Mr Hain, accompanied by Welsh first minister Rhodri Morgan, said: "Today I'm sounding an alarm for Wales - you will only get a Labour government if you vote Labour. Don't have a flutter with your future. A vote for Plaid Cymru or the Liberal Democrats could let the Tories in through the back door." Matthew Tempest